Canadian energy infrastructure companies like Enbridge (TSX: ENB) and TC Energy (TSX: TRP) are solid dividend-income investments. Both companies are top dividend payers and growers, making it hard to decide which is the better buy.
Notably, Enbridge and TC Energy’s payouts are supported by highly contracted, regulated cash flows. This business model helps shield much of their earnings from commodity-price volatility. In addition, planned capital investments and growing energy demand are likely to drive future expansion and dividend growth. Let’s take a closer look at their strengths, yields, and valuation.
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Enbridge offers a higher yield than TC Energy
Enbridge and TC Energy are top TSX dividend stocks with a reliable distribution history. However, Enbridge currently offers a higher dividend yield than TC Energy.
Enbridge has paid dividends for over 70 years and has raised its annual dividend every year since 1995. Its diversified business portfolio, which includes liquid pipelines, natural gas infrastructure, gas utilities, and renewable energy, supports stable earnings and distributable cash flow (DCF). A significant portion of its EBITDA comes from regulated operations and long-term take-or-pay agreements, reducing exposure to commodity price fluctuations.
Enbridge’s growing earnings and DCF per share provide a solid foundation for future dividend increases. Its target payout ratio of 60%–70% of DCF also remains sustainable. Additionally, ENB’s $41 billion secured capital project backlog offers future growth opportunities. Its high asset utilization and a large backlog augur well for growth. Currently, Enbridge offers a 5.8% dividend yield.
In comparison, TC Energy also has a strong dividend growth record, having increased its dividend for 26 consecutive years. Its focus on portfolio optimization lets it sell non-core assets and allocate capital to higher-return opportunities. Furthermore, approximately 98% of its comparable EBITDA comes from regulated operations or long-term take-or-pay contracts, helping maintain cash flow stability despite economic and commodity market fluctuations.
TC Energy’s $22 billion secured project backlog offers additional growth potential and supports future dividend increases. Nevertheless, its dividend yield of approximately 4% remains below Enbridge’s.
Overall, both companies have solid dividend histories and business models designed to generate relatively predictable cash flows. However, Enbridge’s higher yield makes it more appealing to income investors.
Enbridge stock offers a more attractive valuation than TC Energy
Beyond its higher dividend yield, Enbridge appears more attractively valued than TC Energy based on key valuation metrics. Enbridge’s forward price-to-earnings (P/E) ratio is 19.8, compared with 21.6 for TC Energy.
Further, Enbridge’s price-to-sales (P/S) ratio stands at 1.8, significantly below TC Energy’s 5.8, suggesting Enbridge shares trade at a more attractive valuation.
Bottom line: Which is a better buy?
Enbridge appears to be the better buy for income-focused investors, offering a higher dividend yield, a more attractive valuation, and a substantial secured project backlog to support future growth. While TC Energy also provides stable cash flows and a strong dividend growth record, Enbridge’s diversified operations and comparatively lower valuation give it an edge.
